CORONAVIRUS

Lawmakers Weigh Tough Trade-Off Between Unemployment Benefits And Stimulus Checks

Republicans' refusal to increase spending on a COVID-19 relief deal has meant cutting down on unemployment benefits in order to include stimulus checks.
Senate Majority Leader Mitch McConnell (R-Ky.) has been extremely reluctant to fund unemployment benefits, recently proposing
Senate Majority Leader Mitch McConnell (R-Ky.) has been extremely reluctant to fund unemployment benefits, recently proposing only a one-month extension of federal programs. 

Republicans are making Democrats choose between stimulus checks and a longer extension of jobless benefits.

The big news out of COVID-19 relief negotiations this week was that top lawmakers have decided to include direct payments, akin to the $1,200 checks sent out over the spring and summer, though they would likely come out at half the amount. 

Democrats and progressives, led by Sen. Bernie Sanders (I-Vt.) in the Senate, have been lobbying for another round of checks, and President Donald Trump has also endorsed the idea. 

But it has come with a trade-off. 

As of Thursday, the deal that party leaders are putting together behind closed doors would reauthorize federal unemployment benefits for 10 weeks, according to a source familiar with the negotiation — six weeks less than had been agreed to in a previous bipartisan compromise that served as the basis for the current deal. Leaders are keeping an extra $300 per week in jobless pay, a major component of the previous proposal.

The deal is still being negotiated and details about unemployment benefits and direct payments could easily change. 

Shortening the lifespan of federal unemployment programs reduces their projected $180 billion cost. Since lawmakers are operating on a self-imposed spending limit of about $900 billion, less money for unemployment means more money for checks, which had been omitted from the earlier deal. 

After supporting the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act in March, Republicans grew wary of further spending. House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.) initially wanted $3 trillion in the next relief bill, then went down to $2 trillion in October, and then embraced the bipartisan $908 billion deal earlier this month. 

Sen. John Thune (R-S.D.), the second-ranking Senate Republican, told reporters Thursday that if the total “drifts north of that, it’s a lot harder [to] pass.”

Not only do Republicans want a lower top number, they are hostile to both unemployment benefits and stimulus checks. Senate Majority Leader Mitch McConnell (R-Ky.) recently proposed a one-month extension of federal programs and gradually phasing them out over two months, with no supplemental $300. 

Democrats outside the current negotiations have decried the false choice between unemployment and direct payments.

Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee, which oversees unemployment legislation, likened the earlier cutoff date for jobless benefits to arbitrarily cutting off access to the coronavirus vaccine. 

“Millions of jobless workers are thousands of dollars behind on their rent and utilities,” Wyden said in a statement. “Republicans’ insistence on an arbitrary spending cap would inflict unnecessary financial pain on millions of Americans ― there’s no two ways about it.”

Sanders said the inclusion of the checks was a “good start” but had a reportedly heated exchange with moderate Democratic senators yesterday, criticizing the funding levels as deficient.

“The problem we have is, the amount of money being put in the overall bill — about $900 billion — is totally inadequate in terms of hunger, evictions, health care, and people being unable to make it right now on the income they’re receiving,” Sanders told HuffPost in a statement Thursday, calling for another round of $1,200 stimulus checks and for the unemployment benefit to be increased to the $600 per week level passed in the CARES Act. “So it’s not either-or, it’s both.”

Federal unemployment programs that Congress created earlier this year to pay gig workers and the long-term jobless are set to expire at the end of the month. The deal would continue the programs for 10 weeks, plus add about 10 weeks of new eligibility for people who already used up their benefits. The stimulus payments would be worth about $600 for adults with earnings beneath a certain threshold, plus $600 per dependent, according to the source.

In terms of helping the economy, the impact of the tradeoff is a bit murky. The Congressional Budget Office said in an analysis of the CARES Act that unemployment benefits might have had a slightly higher “fiscal multiplier” effect, meaning each dollar spent on unemployment theoretically resulted in a bigger aggregate spending increase than each dollar spent on stimulus checks. But both checks and benefits gave people money that they tended to spend pretty quickly. 

Researchers at Columbia University found that unlike relief efforts in 2001 and 2008, the payments through the CARES Act were spent quickly and on essentials like catching up on late rent, paying the mortgage or buying food, rather than on more “durable goods” like electronics or appliances. In other words, people really need the cash.

Poverty researchers saw the stimulus checks as a novel approach to relief, in large part because they went to the really needy, like those with no income, in a way that more targeted benefits like unemployment insurance do not. But the first relief bill, which included four months of $600 federal unemployment insurance and a $1,200 check, didn’t force the same tradeoffs.

Several studies, including from the Urban Institute and Columbiafound the combination of the unemployment benefits and stimulus payments kept millions out of poverty over the summer. 

Now, Democrats are being forced to do that math, and it’s hard to parse out the benefits of one over the other. For the millions of Americans that find themselves unemployed during the pandemic, six weeks of unemployment benefits with an additional $300 amounts to $1,800 — three times what’s currently being proposed for the one-off stimulus check ― and that’s without factoring in the regular weekly payment to which the $300 is added.

Matt Bruenig, from the leftist think tank People’s Policy Project wrote Thursday that the “ideal solution” would be a repeat of the CARES Act, where both stimulus payments and unemployment insurance were doled out.

“If you have to choose between the two, it’s not at all clear which is the better of the two,” Bruenig wrote.

Asked to choose, James Ziliak, a professor at the University of Kentucky who runs the Center for Poverty Research, said this time around he’d prioritize getting unemployment benefits to wider group of people — including those who have been jobless for long periods of time — over the direct payments.

“I think the stimulus checks made sense in the first round because there was a lot of uncertainty over who was currently and who was likely to be affected by the shutdown,” Ziliak said, calling the checks a “leaky policy.”

While it does help as an anti-poverty measure for those without any income, it also would reach many Americans who likely have flexible work and aren’t hurting as badly, Ziliak said. 

“It’s not very targeted for [those who] are really being hit, and those are the unemployed.”